VAT on major building work

James F

I was wondering if anyone could help with this….

I live in a flat which is a listed building and was converted into a block of 18 flats 9 years ago. There is some major work going on this year which will cost around £200,000 for mainly labour but also materials, to bring it upto building regulations standards (don't ask!). This will be paid for equally by the 18 owners. We all have to give the money to our management agency later this year. The 18 flat owners are all directors of Frost & Reed Ltd, this is the name of the building and we all pay a management monthly fee into F&R Ltd for upkeep of the grounds, small repairs, gardening, communal cleaning etc via the management agency who also charge a fee, I am assuming that the major work will be going through F&R Ltd’s accounts. F&R Ltd is currently not VAT registered.

Now my question is based around VAT. To try and save each of us 18 owners some money, if we all paid a total of £200,000 into F&R Ltd, would this be classed as income or would it be directors capital? If it is income would F&R Ltd be able to register for VAT and be able to claim back the VAT on all the expenditure relating to the major work for labour & materials? Potentially we could get a refund back of £26,087.

Any advice would be appreciated.

PAMDILL

Either way you are gong to be liable for VAT, if the works were classed as being for own use (not invoiced out) you can't claim the VAT back anyway as it is not a new build. Got caught out on that in a VAT inpection before where company owner had used some tiles and a window on his own house and transferred money from his loan account to cover cost.

If you are invoicing out the work and splitting it between the 18 owners then you would have to charge VAT on the work anyway

T.C.

The would not be able to claim the VAT back even if they paid for the work themselves, because it is a residential property. I don't think there is any way to win with this one.

K H

It used to be the case (and i think it still is ) that Construction work on listed buildings can be zero rated by the contractor, so it may not be an issue. Get the contractor to confirm this.

Registering the company for vat is not really an option and throws up more cons than pros (ie partial exemtion etc).

K H

James F

@ K H..... I went to a cpd thing last night about VAT and the speaker mentioned VAT exemption on listed buildings and that's what made me think of this. But I'm not sure if if it was exempt if you're changing it from say a warehouse to a dwelling rather than upkeeping it??

I think this is a grey area and we 18 tenants may just have to foot the bill.

K H

if you look at vat notice 708 this covers it in detail.

it would appear that approved 'alterations' to a listed building can be zero rated but repairs are standard rated.

K H

James F

I guess it depends on what is defined as an alteration or a repair. The work is to bring it upto building regulations, mainly involving replacing unsafe staircases, damproofing, fireproofing of walls, ceilings, partitions and loft space, then redecorating.

K H

If it's not clear in VAT notice 708 then ring customs national advice line and get a ruling (it may even help to get a written ruling).

it could save you lots of money if at least some of it is 'approved alterations'.

K H